EU urged to help automakers

The European Union should provide financial support to automakers to eliminate overcapacity in the industry, a state-funded French institute said on Tuesday.

The Economic, Social and Environmental Council (CESE), which is an advisory body, probed the state of the French automaking industry, which is coming under increasing pressure as European economies stagnate while emerging countries continue to grow apace.

France produced about two million cars last year, slightly more than 3.0 percent of the global total, compared to a 10-percent share for neighbouring Germany.

"According to current projections for 2015, France will account for 2 percent of global production, compared to 6 percent for Germany," warned CESE, which noted that the sector is a major employer.

About 60,000 people are employed directly in automobile assembly plants in France, and adding suppliers and subcontractors the total rises to around 250,000 people, according to industry.

The two main French car makers are PS Peugeot Citroen, which is struggling and is cutting back capacity, and Renault.

The number of French unemployed rose above 3 million for the first time in a decade in September, and the unemployment rate is expected to soon hit 10 percent.

CESE said that France found itself in the situation of increasing automobile manufacturing overcapacity as it became a net importer of cars.

CESE called on the EU to develop a bloc-wide industrial policy to help modernise manufacturing facilities. France has many ageing factories. The president of the European Automobile Manufacturers' Association (ACEA), Sergio Marchionne, has also called for a European-wide approach to tackle the problems of overcapacity and competitiveness, and has criticised German carmakers for blocking any movement in this area. CESE also warned that Germany, where the car industry is faring better, and eastern European countries in which Asian and some European manufacturers have set up new factories, would oppose moves to help western European carmakers.

"Inaction in this area will lead to the long-term weakening for French companies with effects on employment," said CESE.